Real Estate Market Highlights

Rent abatements/lease extensions…Landlords are still willing to work with tenants but are working more from an objective standpoint than one of fear (like a year ago when the world seemed to be ending.) Most landlords will want to see 1-2 years of p&l’s, documentation of what’s occurring. More importantly-for you I would think-they want to know what the franchisor is doing to help out (are they/you reducing your royalties, bolstering your marketing budget, etc. etc. ) The view is now one of a broader partnership between all the parties concerned.

If there are concessions they’re frequently tied to something else-a right to re-capture the space or re-locate a tenant; the elimination of language that impeded the landlord (for ex. Co-tenancy clauses.) Probably doesn’t pertain as much to your situation but is a good example. Landlords may extend the rent today and lock in for a longer period of time but may want to change a guaranty, add a percentage rent clause-you get the idea.

Good Real Estate is still good real estate-In the world we’re living in (at least here) I’m not seeing give away prices on great sites. At the end of the day good real estate is usually owned by smart people. Where we’re seeing the best deals are locations where the owners weren’t quite as smart-they’ve over extended, it’s a development that is poorly sited (mid-block, limited access) or perhaps never should have been built (ex. Of peachtree ndustrial, 141, sections of hwy. 9 in Alpharetta.) Too much product built by amateur developers.

Land prices are down but only slightly- The demand from banks, drug stores, automotive users and fast feeders is down overall there is still enough demand in “good markets” that land prices are holding especially for smaller user parcels. There are deals for large parcels, multi-acre tracts, partially built subdivision lots etc. I’m not seeing, day to day, a dramatic reduction on “prime spots/hard corners.”

Discononect between bid and ask-there still seems to be a real(or perceived which may make it real) disconnect between buyers and sellers. The buyers are convinced that the sellers “ don’t get it “ and understand how hard the market is. Many sellers are not convinced that they’re at the end of the rope and are not currently motivated to get out. Kind of a stand off. Which leads to …

Financing-Two years ago a qualified borrower could probably make a 90/10 loan today it’s more likely 65/35 or perhaps 70/30. Capital is still dear, many banks are sitting on the sidelines. Private equity is increasingly important but the principal sources for small business owners-personal savings, friends and family, home equity, 401 k’s, extended credit card debt-have all dried up. Cash is still king.

Foreclosures-We’re beginning to do some foreclosure work (as is every other broker I know) because that’s where opportunities will exist for another 2-3 years. The worst-I believe- is still ahead of us in terms of foreclosure (probably more in the office, hotel and condo arenas than retail but we’ll have our share.) It’s an alternative way to grow but I’m not sure I’d make it a strategy. Again, a lot of what’s going to become available is not that good to begin with.